Instead of locating dozens of nuclear plants around Asia where they create huge accident, proliferation and terrorism risk, the entire industry should be concentrated at a secure, isolated, former military base in Australia’s isolated Outback.

When a nuclear accident occurs (an inevitability), the affected area can be evacuated, sealed and abandoned. This safeguards cities, a consideration neglected with Chernobyl and Fukushima.

Outback Australia is nearly three quarters the size of China. It has a population density of less than three people per square kilometer.

Parts of coastal China (such Fujian and Zhejiang), soon to be covered with dozens of nuclear plants have population densities of 500+ people per square kilometer.

Even the most devastating commercial nuclear accident in the unsettled remoteness of Australia’s Outback would pose no risk to wider humanity or the global economy.

The time is right for a mature discussion of ‘closed cycle,‘ Outback-generated nuclear power in Australia.

Australian Prime Minister Tony Abbott, Foreign Minister Julie Bishop, Energy Minister Martin Ferguson and former Australian government nuclear research scientist Ziggy Switkowski all now sing praise of nuclear power.

In 2006, Switkowski authored an admirably-detailed government research study on Australian nuclear power.1 In the report, he called for 50 nuclear reactors to be built in Australia by 2050.2

Serendipitously, the ideal Australian Outback location is now available: the uninhabited, underutilised, now-open-for-business Woomera Prohibited Area (WPA).

If 50 nuclear reactors were all built at Woomera, they could singlehandedly catalyse a large-scale, Australian Outback ‘closed cycle’ nuclear industry.

This would create the critical mass to attract additional proposed nuclear plants now being actively considered for highly-populated areas of Malaysia, Thailand, the Philippines, Vietnam and Singapore.

All by itself, the WPA is larger than South Korea, Greece or the US state of Ohio. It’s also surrounded by the nearly equally empty — but much larger — South Australia.

South Australia is twice the size of Thailand, three times the size of Japan, Vietnam or the Philippines. It’s seven-plus times larger than China’s Guangdong, Fujian or Shejiang provinces, where the bulk of China’s nuclear power plants will soon be built in highly-populated areas.

When the next nuclear accident occurs (on historical trends, around 2030) , it will almost certainly occur in China (due to China’s aggressive nuclear capacity buildout).

When it does, the the results will be devastating. In addition to creating a Chinese humanitarian disaster, it could also plunge the global economy into chaos given the pivotal role industrial China now plays in global supply chains.

A nuclear accident on the scale of Fukushima or Chernobyl in China, South Korea or Southeast Asia would wreak havoc on the integrated global economy.

Australian Outback ‘closed cycle’ nuclear power avoids this risk to populated areas. This represents an economic good with a net present value impossible-to-overstate.

The ‘now open for business’ WPAis tailor-made for the job.

Uranium mining already occurs there: at Prominent Hill and Olympic Dam, just outside the WPA’s eastern boundary. Separately, the eastern WPA’s Billa Kalina has been identified is one of the safest geological formations worldwide for storing unlimited nuclear waste for unlimited amounts of time.3

In the WPA’s remote southwest Maralinga,nuclear weapons were tested in the late 1950s and early 1960s4 — indicating nuclear pedigree.

With upstream uranium mining and downstream waste storage available in one place, the intermediate steps (enrichment and nuclear power) can easily be added — creating huge vertical (i.e. the nuclear production and waste-handling chain) and horizontal (electricity output) economies of scale.

All by itself, the numbers it suggests singlehandedly creates the business case for a high-voltage direct current power link from Australia to China.

Serendipitously, the global leader in HVDC technology — State Grid Corp. of China — now ownspart of South Australian electricity distributor Electranet, perhaps with something along these lines in mind.

Earlier this year, for instance, State Grid’s chairman Liu Zhenya proposed building Arctic Ocean wind farms to generate energy delivered to China over HVDC as part of Zhenya’s vision of an emerging ‘Global Internet of Energy.’

Elsewhere in Asia, State Grid is operating and upgrading the Philippine electricity grid under a 25-year contract.

Such a Pan-Asian low-emission energy ‘Silk Road’ could be funded by China’s Asian Infrastructure Investment Bank which Australia reportedly now plans to join.5 With State Grid as primary contractor and Australia as nuclear host, the arrangement would utilize the ‘comparative advantage’ of both countries.

Assuming multi-decade, trouble-free generation of ‘closed cycle’ nuclear at Woomera from, say, 2020-2060, the industry will have won sufficient public confidence to locate the subsequent generation of nuclear power plants closer to Asia’s cities — perhaps around 2060-2070 or so.

In addition to safeguarding population areas from nuclear accident risk, closing the nuclear cycle eliminates the ‘nuclear miles’ that dangerous material must travel. This in turn eliminates proliferation and terrorism risk.

In China uranium must now be imported, shipped to enrichment plants, shipped to nuclear plants, with waste then shipped for either reprocessing or burial.This all adds scope for mistakes, accidents or theft.

Naturally,China has learned from nuclear technology and operational mistakes made elsewhere. But that offers limited assurance. China also learned from international experience in building high-speed rail system, but that didn’t prevent a tragic accident from happening in China with the new technology.

Concentrating the nuclear industry in one place also better utilizes scarce global nuclear talent, significantly eroded by decades of controversy. The industry now faces deep skills shortages as young professionals sensibly avoid entering the industry.

Creating a closed-cycle nuclear power industry on a former government military installation also ensures security and can eliminate nuclear proliferation and/or theft of nuclear materials that can be used to make bombs.

It can also gain the industry a needed ‘social license’ and the confidence of the public

China plans to build 150,00MW of nuclear capacity by 2050, adding nearly a third to existing global capacity.

Embedded in all this is massive risk. The scale of the buildout is causing public protest6 ,7 from ordinary Chinese unconvinced the industry will remain completely safe over the long term.8

In Australia, even the worst, large-scale radiation release would need to travel multiples of the distances of Fukushima or Chernobyl’s radiation clouds to reach significantly-populated areas.

This guarantees public safety. That will increase public confidence. It removes a huge contingent financial risk from government in the form of a private sector nuclear disaster.9

In a ‘worst case’ nuclear accident scenario, the WPA can be evacuated, lockedat the service town of Pimba out and abandoned for centuries — even millenia.

An interconnected, multi-fuel pipeline network makes much more sense — for both Australia and Asia.

In coming years, Asia must invest trillions of dollars in new infrastructure, half of it to deliver energy. This infrastructure must serve a multi-decade transition of uncertain speed from coal to gas to low emission energy.

A big player will be China’s $50 billionAsian Infrastructure Investment Bank. Australia,1 Indonesia2 and all of the Association of Southeast Asian Nation states will be members.

As Asia’s biggest, most populous, most energy-hungry economy, China will occupy the center of all this. Recently, China and Russia agreed to new large-scale gas pipeline interconnections. To China’s south, the ASEAN states have developed a Trans-ASEAN Gas Pipelinenetwork to connect their 10 economies.

Australia’s Woodside is now considering building a gas pipeline across the Timor Sea to East Timor3 . Inpex is already building one from its Australian Northwest Shelf Browse field to Darwin.4

Done right, interconnected gas markets in Asia can speed the shift to the low emission energy sources the region so desperately needs.

Serendipitously, the core of a Pan-Asian Gas Pipeline connecting Australia, Southeast Asia, China and Russia is taking shape. What’s needed now is to integrate the system and eliminate uneconomic network fragmentation. Natural gas is a fungible commodity. It’s ideally suited to network delivery, just like data packets are over the internet.

Natural gas pipelines can deliver and distribute baseload gas for the short-term, load-balancing gas for the medium term,8 and future fuels derived from renewable energy (like hydrogen) over the long-term. This is a critical flexibility LNG doesn’t have.

High voltage, high capacity power lines can later be laid parallel to this trans-regional gas pipeline network. This will increase energy market substitution, creating a more competitive energy market weighted by — among other things — distance, carbon and congestion.

In short, it will create a more liquid, competitive market that will boost Asia’s economic growth and living standards while reducing the legacy diseconomies that created the global climate change problem in the first place.

The efficiencies will be enormous. Consider some examples.

Fresh from success in transporting Three Gorges Dam hydropower over 2,000 kilometers to Shanghai, Chinese infrastructure state champion State Grid Corp. of Chinais now operating and upgrading the Philippine electricity grid under a 25-year contract. State Grid also now owns 41% of South Australia’s electricity distributor Electranet.

This gives Asia’s largest electricity grid constructor a presence in all three Asian regions: China, Southeast Asia and Australia. This hasn’t been a random strategy. Indeed, it’s been helped by changing public sentiment in Australia.

A symposium in Darwin in 2013 evaluated the potential for high-capacity power line routes from the Northern Territory to Indonesia’s eastern islands to connect Australia to Asia.9Woodside and State Grid could team up here, building infrastructure partially funded by the AIIB that enhances Australia’s energy export capability while laying the southern foundation for China’s Maritime Silk Road.

What’s not to like?

Clearly, the long-term vision of a Pan-Asian Energy Infrastructure is emerging.

In this vision, LNG’s myopic 25-year depreciation schedule is a poor fit.

Global investment ‘animal spirits’ may be sensing this, and marking down LNG assets accordingly. As this occurs, the longest legacy left by LNG in Australia may be coastal industrial blight and a deeply environmentally-damaged Great Barrier Reef. Where’s the economic value there? Prices are now telling us.

Gas pipelines require less energy, serve more destinations, have more long-term flexibility and integrate better with other infrastructure, like power lines and fiber optics. LNG offers none of these synergies.

It’s time to thing big, think long-term, think multifaceted and think multilaterally. In one corner are infinite depreciation, carbon-efficient pipelines and power lines; in the other is short-term LNG and no carbon prices.

China’s Yangcheng and Fengtai coal fired power plants are China two best known existing ‘coal by wire’ power plants.Sources: Power Technology, ABB,Carbon Capture Institute (Australia), APEC

That’s because it’s the first step in a long march toward wider application of ‘energy by wire.’

In Beijing, the closed generating capacity will be replaced by electricity transmitted to the capital from rural coal-fired power plants closer to coal mines and carbon geosequestration sites.

China calls this ‘coal by wire.’ Over time, ‘coal by wire’ can be followed by ‘gas by pipeline, ‘gas by wire’ and ‘nuclear by wire.’

These, in turn, will exploit the power of markets to solve climate change.

Put into a larger context, China’s ‘coal by wire’ represents the first step in developing a long-term conceptual road map for a low emission energy Asia.

That’s because if we take the concept of coal by wire and scale it up, it argues in favor of building creation of a‘Pan-Asian Energy Infrastructure’ stretching from China to Australia.

This infrastructure would deliver ‘energy by wire’ of all kinds. It would be an ‘internet of energy’ serving China, Japan, South Korea, the Association of Southeast Asian Nation States, East Timor and Australia.

Two billion consumers live in these countries. They produce 40% of global Gross Domestic Product.

To sketch out the evolution to ‘energy by wire,’ start with China’s ‘coal by wire’ policy for Beijing.

In implementing the policy, China paid heed to four economic theories.

Together, they make a powerful combination that harnesses market forces.

Startled by the decline in Beijing’s air quality, China’s leadership is closing coal-fired power plants in the city.1 ,2 ,3 ,4 ,5

These are to be replaced by natural gas plants or ‘coal by wire’ power plants. ‘Coal by wire’ power plants are located closer to coal mines and carbon geo-sequestration sites.

Under ‘coal by wire,’ only electricity is transmitted to urban demand centers. The carbon pollution is left behind.

The ‘coal by wire’ concept is derived from applying the ‘theory of comparative advantage.’

Under ‘comparative advantage,’ industries are located where they create the greatest value. This value is then traded. The resulting specialization leaves everyone better off.

Originally conceived to encourage international trade in 19th Century Europe, ‘comparative advantage’ also offers an contemporary economic framework for solving climate change in the 21st Century.

In the case of coal, this dirty power source can create the most value by being generated away from China’s cities and closer to coal mines. Putting power plants and coal mines together reduces transport costs by transporting just the value-added electricity to the city instead of the heavy bulk commodity coal.

This simultaneously reduces the ‘negative externality’ of urban coal-fired air pollution. ‘Negative externalities’ are unpriced negative outcomes — for instance the negative impact industrial river pollution has on fishernen.

Climate change is the largest ‘negative externality’ ever created. It is the result of all the uncosted carbon emissions emitted since the Industrial Revolution.

In the case of ‘coal by wire, the benefits don’t end with developing comparative advantage and reducing negative externality.

Instead, ‘coal by wire’ just transports value-added electricity over flexible, multi-purpose, interconnected power lines that can reap ‘network economies.’

China’s ‘coal by wire’ policy dates at least as far back to theNinth Five Year Plan (1996-2000).6 The primary aim back then was to reduce road and rail congestion. Now that China’s infrastructure has been built up, reducing urban air pollution is more important.

In terms of ‘coal by wire’ in China, it’s still early days.Few specifics have been announced. To date, only a few easily-identifiable ‘coal by wire’ plants have been built in China. The two most visible are the Yangcheng and Fengtai power plants.

Yangcheng 7 is a 2,100MW power plant in Shanxi province. It opened in 2002 and supplies power to Jiangsu province over a 740 km HVDC line. The 2,520MW FengtaiPower Plant 8 in Anhui Province transmits electricity to Zhejiang Province.

These two ‘coal by wire’ power plants, along with China’s stunning success in delivering long distance power to Shanghai and Hong Kong over HVDC from hydro dams in her interior, represent ideal examples of the future ‘energy by wire’ concept.

Urban air pollution and its negative impact on public health now jeopardize achievement of the ‘Chinese Dream’ of rising personal income and improved quality of life.

‘Coal by wire’ aims to turn this around starting (presumably) with Beijing and then spreading the idea more widely around China wherever energy-related environmental degradation threatens urban quality of life.

At China’s Three Gorges Dam project, hydropower is transmitted by High Voltage Direct Current power lines over 2,000 kilometers to Shanghai. The project might be dubbed ‘hydro by wire.’

‘Hydro-by-wire’ and ‘coal-by-wire’ are economic mirror images. ‘Hydro by wire’ brings clean energy to the city. ‘Coal by wire’ removes dirty energy from the city.

The two examples provide arguments for the potential of ‘energy by wire’ of all kinds ( (solar, wind, natural gas, geothermal, coal, nuclear).

In future columns, we will cover this in greater detail.

We will also outline how applying the ‘energy by wire’ concept exposes the poor economics of Liquid Natural Gas trade in Asia. We’ll also discuss how it can be applied to eliminating the risks of large scale nuclear power.

We’ll then discuss how powerlines and pipelines can create a much more efficient, flexible energy delivery market in Asia.

We’ll then outline how such an infrastructure could last a century or more by serving coal, gas, nuclear and renewables in turn.

Finally, we’ll discuss how new market mechanisms, regional institutions and deeper geopolitical integration can emerge from this concept. Across this system will flow all kinds of energy, from solar to wind to biomass and geothermal, all balance by supply, demand, distance and carbon prices.